Rebate on housing loan for let-out property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2014 I have taken housing loan during last Jun-13 for purchase of new house, paid Interest around 3 lakh for FY 2013-14. The house property was vacant till end of Nov-13 and let-out Dec-13 onwards. I need to understand how much Interest I can calim as deduction for FY 2013-14 and how much Rental Income is to be taxable.

Rupesh Jain

Rupesh Jain (Expert)
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25 June 2014 you can claim the whole intt against the rental income without any limit. u/s 24(b)

Querist : Anonymous

Querist : Anonymous (Querist)

25 June 2014 Thnaks.

What about Rental Income, as property was let-out only for 4 months during FY 2013-14. It is taxable for 10 month (Jun-Mar) or only for four month.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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20 July 2025 1. Interest Deduction on Housing Loan for Let-Out Property
You took the housing loan in June 2013 and paid around Rs. 3 lakh interest during FY 2013-14.
The property was vacant from June to November 2013 and let out from December 2013 onwards.
Tax treatment of interest paid for FY 2013-14:

For let-out property, under Section 24(b) of the Income Tax Act, you can claim a deduction of interest paid on housing loan against income from house property.
However, if the property is not let out during part of the year, interest for that period (vacant period) is treated as “deemed to be let out” for the whole year, but the maximum deduction allowed is Rs. 2 lakh per year for self-occupied property.
Since your property was vacant for part of the year but let out for the rest, it’s treated as let-out property for the entire year, but you can only claim interest deduction proportionate to the period it was let out.
Calculation:

Interest paid: Rs. 3,00,000
Period let out: 4 months (Dec 2013 - Mar 2014)
Period vacant: 6 months (Jun 2013 - Nov 2013)
For the vacant period, no rental income, but interest paid is still deductible but limited.

In practical terms:

Interest deduction allowed = (Interest paid) × (Period property was let out / 12 months)
So, Deductible Interest = 3,00,000 × 4/12 = Rs. 1,00,000 (approx.)
The rest interest (for vacant period) can be claimed but overall interest deduction for let-out property is unlimited (subject to actual interest paid), but you may only claim interest proportional to the period property was let out.

Note: If the property was vacant and not let out for whole year, then maximum Rs. 2 lakh interest deduction allowed for self-occupied property.

2. Taxability of Rental Income
Rental income is taxable on the basis of actual rent received or receivable during the year.
Since the property was let out only for 4 months (Dec 2013 to Mar 2014), you should declare rental income only for those 4 months.
So, rental income will be taxable for only 4 months, not for the full year or 10 months.

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